If an employer's business is closed because of, for example, flooding, is it obliged to pay its employees?
If an employer temporarily has to close its business premises at short notice because of unforeseen circumstances such as flooding, fire or a flu pandemic, and there is no work available for its employees as a result, this will result in a period of lay-off. Unless there is a contractual right to lay employees off without pay, or employees expressly consent to being laid off without pay, they will be entitled to receive their normal pay for the duration of the lay-off. If the employer fails to pay employees they may sue for damages, or claim unfair constructive dismissal (if they resign as a result of the non-payment) on the ground that there has been a fundamental breach of the contract of employment. Employees may also claim that the employer has made unauthorised deductions from wages.
Even where an employee's contract of employment contains an express contractual right for the employer to impose a period of lay-off without pay, or the employee consents to a period of lay-off without pay, they are, subject to certain exceptions, entitled to a statutory guarantee payment for any complete day of lay-off. Guarantee payments are limited to a maximum of five days' payment in any three-month period. If the employee is normally required to work fewer than five days a week, the entitlement cannot exceed the number of days that they are required to work per week under the contract. The amount of guarantee payment per day is based on the employee's normal daily rate of pay, but subject to a statutory maximum.